A YEAR OF EPU, 1950-51
"From its first meeting, the Managing Board of the EPU found itself facing a dramatic situation," said the Secretary General of the OEEC, "since on the solution it found depended in large measure the development of intra-European payment perhaps one could even say, the future of the Epu itself. . . ."1 The first clearing, covering transaction for July, August and September, revealed that Germany had already used up more than half its quota of $320 million. And German deficit was growing; September's figure more than tripled July's. The clearing for October showed a new deficit of $116 million, bringing the cumulative figure to $289.5 million. At the rate, Germany would exhaust its quota in a few weeks and then have to pay all its EPU deficits in dollars. This the Germans could not long afford; unless in some way they could get additional foreign exchange they would have to cut imports drastically. Could Germany overcome its deficits without resorting to policies conflicting with the aims of EPU and trade liberalization program? Could these major efforts of the OEEC survive the defection of one of the principal trading countries of Western Europe?
The roots of the German payments deficit were in three sets of events: the rapid rise of production in Germany, the Korean war, and the Bonn Government's removal of controls over the German economy. A number of financial practices,____________________